If you remember back a few quarters, ASBA/O’Neil ranked Tucson the worst in Arizona for it’s friendliness towards business. Well they are at it again but this time our local media missed it. Why you ask did they fail to catch the survey? Because is was actually GOOD news for a change.

Tempe-based O’Neil Associations/ASBA Economic Indicators Monitor showed 25 percent of poll participants ranked Tempe as having the best quality of life, followed by Tucson (21 percent), Prescott (21 percent) and Phoenix (8 percent).

The survey, which has a six point margin of error, also said 29 percent of respondents said Tempe had the best downtown, followed by Phoenix (23 percent) and Scottsdale ( 21 percent) and Prescott (15 percent).

Forward Thinking -Southern Arizona is trying to set the stage for a post-recession surge

By Janet Perez

Like the rest of the state, Southern Arizona has been in a recession since 2007, and at least one prominent economist says the situation won’t be getting better anytime soon.

“My forecast is that it’s going to take a while to get (credit markets) straightened out again and functioning as they should,” says Marshall Vest, director of the Economic and Business Research Center at the University of Arizona’s Eller College of Management. “I think that takes up most of 2009. Then we have all the excess housing that needs to be absorbed. That’s going to take some time and we’re not really absorbing the housing right now because credit markets have been essentially frozen. So, I think it’s the end of 2009 before the economy really regains its footing. I think we’ll start to move up in 2010. By move up, I mean the economy will once again begin to expand and enter a recovery phase.”

Joe Snell, president and CEO of Tucson Regional Economic Opportunities (TREO), says that despite the already deteriorating economic conditions, Tucson still managed to draw new companies and expansions in 2008.

“We’re definitely seeing a slow down in a lot of ways, both in the recruitment of companies and the expansion of companies, but not a massive downtick,” he says. “Our pipeline is as full as it’s ever been. But what we are seeing are companies that may have been ready to announce a $100 million expansion in November saying, ‘We’re going to wait on that until January, we’re cautious, we want to see what’s going to happen in the next three months.’ ”

Last year, the region still saw growth in the health care, bioscience, alternative energy and aerospace industries. Of particular note was the purchase of Ventana Medical Systems in Oro Valley by Swiss drug maker Roche for $3.4 billion. Roche also announced plans for a $100 million expansion at Ventana that would increase employment from 750 to about 1,000. In addition, Roche purchased more than 17 acres of land around the Ventana site to expand the location.

“Possibly the most significant thing we can point to though, is that 57 percent of the successful projects were in our targeted industries, and that’s important because those targeted industries represent quality rather than quantity, meaning, closing the wage gap,” Snell says. “Historically, Tucson has ranked somewhat below both the state and the national average in wages. So we’re rapidly moving in the right direction to close that gap. To me, that’s a big takeaway.”

Southern Arizona has not been immune to the effects of the housing market collapse and its devastating impact on the construction industry. For example, one of the first companies TREO recruited, window and doormaker Pella Corp., announced in November 2008 that it was idling its  Tucson plant, affecting 65 workers. When Pella first located to Tucson in 2005, company officials said it had plans to employ more than 400 people at its facility.

Still, as Vest points out, since the construction boom was not as great in Southern Arizona as it was in the Phoenix area, the drop has been less precipitous. For example, year-over-year job losses in the construction industry in October 2008 stood at 4,000 in the Tucson metro area, according to figures from the Arizona Department of Commerce. In the Phoenix-Scottsdale-Mesa area, 30,000 construction industry jobs were lost during the same period.

“Commercial (construction) is still in relatively good shape. Vacancy rates are moving up, but they are still fairly low. Tucson didn’t see the construction boom in commercial that you saw in Phoenix, so, commercial construction here in Tucson doesn’t have as far to fall,” Vest says. “For residential, the indicators that I see are pretty comparable to Phoenix, except for the housing price data. I don’t think the declines have been quite as large (in Southern Arizona).”

Snell says that so far, Southern Arizona has managed to hold its own on employment.

“We have losses in construction, but we’re gaining it on biotech, we’re gaining it on solar, we’re gaining it in logistics companies. I think right now we’re sort of a wash,” he says.

Vest, however, expects more job losses across the state as the recession drags on through 2009. In fact, comparisons of unemployment rates from 2007 and 2008 already are startlingly eye opening.

In October 2008, the unemployment rate for the state, the Phoenix metro and the Tucson metro stood at 6.1 percent, 5.5 percent and 5.8 percent, respectively. In October 2007, the state’s unemployment rate was 3.9 percent, Phoenix’s was at 3.4 percent, and Tucson came in at 3.9 percent.

“I think the unemployment rate will likely reach 8 percent before we’re through,” Vest says.

Vest adds that rate is in line with the jobless figures of the last major recession of the early 1980s. Back then, unemployment peaked at 13 percent in the state, 8.9 percent in Phoenix and 10.5 percent in Tucson.

Fortunately for Southern Arizona, Vest says, the region’s economy is considerably more diverse than it was in the early ’80s. But with credit still tight and the housing market stuck in freefall, Vest cautions about being too optimistic on the strength of a recovery.

“I really think this recovery is probably going to be muted. I don’t see us rebounding very strongly. The process is going to take awhile,” he says. “This recession is going to be longer than the recessions of the early ’80s or mid ’70s. If it stretches through 2009 and the recession began in the fourth quarter of 2007, we’re talking about a two-year-long recession. Nationwide, the longest recession has been 16 months.

“It’s been a very long time in this country since we have encountered a very severe recession. The recessions of 2001 and 1991 were both very short and shallow. They barely qualified as recessions, rather than a growth slowdown. It’s only the gray hairs that remember what a severe recession is like,” Vest adds. “This is scary. This is messy. But we’ve been through this before. If you are a business and you can hang on and remain solvent and get through this, there will be plenty of opportunities on the other side. I would also say that it’s during times like this that the seeds are sown for fortunes to be made. Savvy investors will take positions in markets where assets are cheap and will benefit handsomely as the economy recovers —as surely it will. And the deep pockets know that and there is a lot of money on the sidelines waiting for the right opportunity.”

Snell agrees, adding that now is the time for Southern Arizona to stake a claim in future growth and prosperity.

“We’re not going to ride out the recession. I’m a big believer that now is the time to get aggressive,” he says. “I think we have a good head of steam. At this point, I would say Tucson is as competitive as any major city in the country, including Phoenix. That’s a first for us. Are we going to get cooled off by the national economy? Yes, absolutely. But I think we’re in as good a position as anyone coming out of this recession to capitalize, and maybe within this recession to capitalize.” 

www.arizona.edu
www.treoaz.org
www.azcommerce.com

A State, just like a City or County can take steps today that will change the course of their future for generations to come.  Six years ago the legislators in Texas set the state on a new course of action. A number of factors  made a difference, not the least of which were tort reform and a favorable tax environment. Texas is touted as one of the most pro-business climates in the US.  Both  Arizona and Texas have similarities like a strong university system, major quality of life and climate benefits and a diverse workforce. Texas isn’t saddled by our State Land Trust issues which as you look around Arizona is a big hurdle we have to figure out.  With the right leadership in Arizona state government maybe, just maybe we can look back in a few years and see Arizona on top of some of these pro business lists.From Expansion Management

State Continues to Draw Projects

Texas remains at the forefront in attracting expansion and relocation projects primarily because of its pro-business attitude. Another factor is two dozen major universities providing research and development capabilities, as well as training partnerships.

When the high-tech industry took off in Austin, Texas’ capital city, Austin Community College developed a program to train high-tech workers so companies could find a skilled and educated work force, said Patrick Shaughnessy, communications manager for the Texas Department of Economic Development.

That’s why Oracle, the world’s largest provider of database software, recently selected Austin for its high-availability data center.

Oracle looked at all viable options within the United States and short-listed 15 facilities, including ones in Missouri, Colorado, Massachusetts and Arizona, said Oracle spokeswoman Letty Ledbetter.

Oracle’s strategic partnership with Dell Computer, headquartered in Austin, was another major factor in the decision.

Also taking advantage of Austin’s high-tech expertise is PerformanceRetail, which moved its headquarters from Houston in July.

“Austin has a solid record in creating some of the world’s largest and most successful technology companies,” said Gregg Burt, president and CEO of Performance Retail. “This move gives us ready access to the talent we need to continue our leadership position in the development of retail technologies and expand our efforts to better serve our growing client roster of global corporations.”

California’s Bay Area was considered, said Dean Cruse, vice president of marketing.

Location Makes a Difference

The state’s 1,248-mile border with Mexico translates into a large bilingual work force, a contributing factor in Clarke American Checks’ decision to open a second contact center in San Antonio in August.

The new $12 million facility will provide customer service and sales via telephone, e-mail and Web chat for its partners and their customers, which includes more than 4,000 banks, credit unions and other financial institutions nationwide.

With 350 people working at its first facility, Clarke American plans to add another 350 at the new 42,000 square foot facility.

Kaari Swope, Clarke American’svice president and general manager of customer service, said the company considered alternative sites in Kansas, Iowa, Utah and other locations in the Midwest.

“We chose to add a second facility in San Antonio because of the existing infrastructure, the high quality work force available and because of the advantages of being able to hire a bilingual work force,” Swope said.

The state’s other major metropolitan area, Dallas/Fort Worth, recently welcomed two new arrivals.

Safety-Kleen Corp., which helps more than 400,000 companies regulate hazardous and non-hazardous waste, will add 250 employees at its new 120,000 square foot corporate headquarters. In a memo to company employees, company CEO Ronald A. Rittenmeyer said Dallas’ central geographic location, its availability of affordable real estate, and a comparable cost of living were important factors.

Those were the same reasons Washington Mutual, one of the nation’s largest financial services companies, announced in May plans to open a national commercial loan servicing and operations center in the region, bringing 300 new jobs.

“We selected the Dallas area – and Coppell, specifically -because it offers quality real estate options, an abundance of highly skilled workers, and high quality-of-life measures, such as affordability, great schools and access to arts and culture,” said Stuart Miles, senior vice president for Washington Mutual.

Company spokesman Joe Arbona said the company considered Kansas City, Houston and Indianapolis, but felt Dallas offered the best pool of talent to fill the positions.

 

Dan Perkins is a freelance writer based in St. Louis, Mo.

Texas Job Creation Data HERE. and rankings HERE.

Some highlights of how Texas ranks;

Texas: The Business Advantage

Texas has established a worldwide reputation for its open, positive attitude toward the business community. With a low tax burden, low living costs, a Texas-friendly lifestyle and government programs designed to help rather than hinder business, the Lone Star State is the perfect location to build your company.

• If Texas were its own country, its economy would rank 12th in the world, just below Brazil and Russia and higher than India, South Korea and Australia.
• The Tax Foundation ranks Texas 43rd among states for its combined 2007 state and local tax burden. That’s a contest in which first place is no prize!
• According to the Missouri Economic Research and Information Center, Texas had the third-lowest cost of living among all U.S. states in the fourth quarter of 2007, and by far the lowest cost of living among the 10 largest states.
• The Texas Enterprise Fund, created in 2003, gives Texas leaders unique leverage in using incentives to attract jobs and business to the state. The Texas Governor’s Office reports that the fund has brought 51,800 new jobs to the state and generated $15.6 billion in capital investments.
• Since 2005, Texas’ Emerging Technology Fund has been helping early-stage technology companies bring innovative products and services to market.
• Texas has made a substantial and ongoing commitment to upgrading the skills of its workers. The Texas Skills Development Fund, which provides state funding for employee training, awarded $25 million in grants in 2007 that generated nearly 7,100 new jobs and provided training to 13,758 workers in existing jobs.
• Texas emerged as the clear winner in Fortune magazine’s 2007 ranking of the nation’s 100 fastest-growing companies, with 32. California was a distant second, with 11 companies.
• In Chief Executive magazine’s annual nationwide poll of chief executive officers, Texas has been chosen as the best state in which to do business for four consecutive years (2005-2008).

The CNBC financial news network ranked Texas as America’s Top State for Business in 2008 and best all-around economy in the United States.

Craddick: Texas’ pro-business moves will help weather economic turmoil

By Mella McEwen
Oil Editor

Published: Thursday, October 16, 2008 6:11 PM CDT

Amid the economic turmoil roiling the country and spreading across the globe, the state of Texas is an island of economic calm, according to Texas House Speaker Tom Craddick….

The state also is an island “created six years ago when we consolidated agencies and cut spending and made the government work like every other business,”Craddick added. “We had people who made the hard decisions and did what needed to be done.”

The Midlander told his audience that “We have $12 billion in our rainy day fund and $5 billion to $6 billion surplus funds in our general revenue” as the Texas Legislature prepares to meet in January.

“If you’ve been following what’s going on, California is facing a $19 billion budget deficit and has asked the federal government for a loan,” he said. “When I was elected speaker, we were facing a $5 billion deficit. When

I was sworn in, it was a $10 billion deficit. We didn’t ask the federal government for a loan, we formed a new appropriations committee and cut spending.” He cited as an example the Health and Human Services, where 13 agencies were combined into three, saving approximately $1.5 billion a year.

Tort reform passing at the same time also helped, he said, stressing that legislation was not passed just to benefit doctors, though it has attracted 11,000 new doctors to the state in the last four years.

“Everyone across the board has benefited from tort reform,” he said. “We got rid of most frivolous lawsuits” and companies looking to move to Texas have told him one reason is tort reform…

He predicted education funding will be a major focus of the session, telling the audience that “In my opinion, we’ve got to find another way to fund education and move away from property taxes.”

He also wants to update the school formula he said dates back to the 1960s and make sure good teachers are rewarded for their efforts.

 

Transportation will be another focus, Craddick said, noting that the Transportation Commission recently announced it cannot locate $1 billion in funds.

“We’re sending in an audit committee and we will find that $1 billion,” he said. “You won’t recognize TxDOTwhen we get through. Here, about 1 percent of you are concerned about transportation. In Dallas, 99 percent are concerned about transportation. The gasoline tax is not raising enough to keep up with our infrastructure. We need to look at options on funding transportation.”

Health care will be another issue, he said, saying he wants to find ways to let small companies band together in larger groups so they can find healthcare insurance that offers better coverage at better rates.

Mella McEwen can be reached at casell@mrt.com.

“Austin offered a lower cost of living, a great lifestyle, inexpensive services and access to a large, talented pool of technology professionals,” Cruse said.